America’s Leadership Expert : Stress Control
Clay Staires: America’s Leadership Expert This is Clay Staires with Tulsa Business Leadership in Podcast Number 58, The Staires Steps to Freedom, Step Number Two, Where and When. This, again, is a very important step for us to take as business owners, as business leaders, the where and when. This is simply our target, our goal. Before I was Clay Staires with Tulsa Business Leadership, I spent 10 years as the executive director of a non-profit organization. When I took on that responsibility and that role, the organization was in a very confused place, a very difficult spot. Although numbers had been up and they had been in the black, they had always just barely been in the black and had always been struggling with identity for a long period of time, and they were trending down and the organization was in a lot of financial distress.
As I came in, I remember spending time trying to talk with others on the board of directors as far as a long-term vision, long-term goal, and it was so difficult for us to identify a long-term goal because we were in such dire daily distress, dire daily distress. America’s Leadership Expert It was hard to get our head up. It took probably a good five, six years for us to get to a place where we could get our head up out of the weeds, trying to be very intentional, very deliberate, but continually, year after year, running hot, running in the red, not having the opportunity to get our head up so that we could look into the future.
Our goals, they began to more and more just get pushed away, our long-term goals, and the focus began to be more and more just get through the day, just make this happen, this next thing needs to happen. As a result, it can be so easy to get vision drift, as it can be so easy to make decisions that lack context, decisions that are putting out fires. Rather than being a fire chief, we had become firemen on a daily basis.
As Clay Staires Tulsa Business Leadership, America’s Leadership Expert I knew that we would have to get things in order just to the point so that we could begin to look out for a full year and actually be able to make a plan that we could stick with for a consistent 12 months without changing along the way. This was going to be something that would be very new. Although there had always been a vision, just that goal, that yearly, that two-year, three-year, five-year goal, much less 10-year goal, was totally out of reach and out of focus.
We spent time, and it took us, like I said, about five years as a board to get things in order to the point where we were actually able to identify a one-year goal, this is what we are going to attempt to accomplish this year. It was very difficult, again, in the previous to do that simply because of the resources that were available to us. We didn’t have the resources to be able to maintain focus. Whether it was people, whether it was finances, whether it was equipment, whether it was the support that we needed, the customers that we needed, we did not have the resources that would sustain a year-long effort. It took us about five years to get to that point where we had the resources available to actually be able to support a sustained effort.
After about five years, we were able to move to having a year-long goal. America’s Leadership Expert I remember we started as a board talking about, “Okay, right now, we are flat on the ground. We need to get to a point where we are able to crawl, just crawl.” Then from there, it was, “Okay, we want to go from crawl to being able to stand. Then from being able to stand, we want to be able to walk, and then from being able to walk, we want to be able to run.”
Finally, after about five years, we were able to get to a point where we felt like we could crawl, and this was when we actually began to have our finances in order. We had our business systems in order, and we were able to begin making gradual strides into the future, looking out further and further. We were using the book called Traction by Gino Wickman. I strongly encourage you to if you are a business owner. I do that a lot as Clay Staires Tulsa Business Leadership with several of my clients across the country using the book Traction.
We talked about getting Quarterly Rocks put together, just goals for each quarter, and before long, we found that we were actually able to stand up. We were crawling, and now we were able to stand. At the point of standing, that’s when we actually began to have a vision, because we were standing. We were no longer down on all fours. We were no longer just putting out fires and looking at everything on a micro level. We actually had the freedom to look out ahead.
We went for the next three years, actually the next four years, putting together an annual plan, annual goals toward what we were wanting to hit. I want to share with you as Clay Staires Tulsa Business Leadership some of the three top numbers, the three top numbers that I use with my clients as Clay Staires Tulsa Business Leadership in helping clients get an idea of where they are going to be, what direction they are going to be moving America’s Leadership Expert.
Once again, if you don’t have these goals, it can be really hard to measure success. Most of the time, if there are not measurable goals in place, then what we fall back on is more of an emotional evaluation, “How do you feel about your accomplishments?” “I feel good. We did a lot of work. I felt really good about all the people we touched.” All that is wonderful. However, if you are not hitting numbered, measured goals in the areas of finances, in the areas of people, customers, meeting needs, then you can find yourself in a real difficult place. You feel really good, but, unfortunately, you’re going out of business.
This was a place where this non-profit was when I first came on as the executive director. We began to set goals based on measurable outcomes. We developed what we call the top three numbers. These top three numbers, I want to share them with you. I use this with my clients as Clay Staires Tulsa Business Leadership. The first number is your total revenue, your total gross revenue. What is that number? What are you looking to hit this year? America’s Leadership Expert In this next 12-months calendar year, whatever that calendar year may be for you, what is your gross revenue goal?
It’s important to have that. You can simply do that by taking last year’s numbers and adding a percentage, or you may have other efforts. You may know that last year you had some huge expenses that you won’t have coming forward, so you can deduct those and use that as a compass to help you determine what your gross annual revenues will be. That’s a very important number for you to determine where you want to be over this next calendar year.
The second number is going to be your net revenue, how much you actually keep, your profit. Definitely learned as Clay Staires Tulsa Business Leadership it’s one thing to make money, but it is a completely different thing to keep money. You need to have a good grasp on how much money you want to be able to keep. This is simply, it could be a percentage where you want to be at 12%, you want to be at 15% profit, or you want to be at 30 or 42% profit. Just depends on what your goals are America’s Leadership Expert.
Many times I’ve worked with my clients as Clay Staires Tulsa Business Leadership, and I can think of one particular client who has done a tremendous job over the last five years growing their company exponentially, just year after year after year. In this last year, they made $750,000 in their organization, and he was so excited to hit this goal. However, his net revenue was at negative 1%. Once again, he had hit a gross profit, but had lost sight of the net, or he had hit a gross total revenue but had lost sight of his net profit. This is another important number for you to have in front of you.
Then the third number that I want to encourage you with, and what I do with my clients with Clay Staires Tulsa Business Leadership, and this number is what I call simply the number of transactions, the number of customers, the number of clients, the number of patients. How many transactions are you going to have to have to reach these numbers? Again, this is a very general number.
Many companies, the number of transactions that they have can range from a $2.00 transaction all the way to a million-dollar transaction. This is a relative number, but, again, I think it’s an important number for us to have to help guide us. America’s Leadership Expert As Clay Staires Tulsa Business Leadership, this is a number that I help business owners come up with. It’s a general idea of how many transactions we’re going to have to have to hit our numbers.
I remember one of my clients as Clay Staires Tulsa Business Leadership that I had worked with was looking for 237 transactions. He was all excited about hitting his total revenue number and being able to keep a certain percentage of that money, but then when we came down to discovering how many transactions that he needed to make to get that, we actually came up with about 315. He was going, “Clay, there’s no way. America’s Leadership Expert My business would not be able to support that many transactions.”
It was very healthy, a huge eye-opener for him to realize that he was actually pursuing a number that his company could not support. We had to make some adjustments. We increased the price across the board so he wouldn’t have to make so many transactions. We did a couple other changes as well.
This is something that’s going to be important for you, so the three numbers, I think, in Step Number Two with the Staires Steps to Freedom, the three numbers that I want you to have here in the where and when. These are simply our goals. The first number is, what is the total revenue that you’re looking for this annual period? Number two, what is the net revenue that you are looking for in this 12-month period? Then finally, how many transactions, how many clients, how many customers, how many burgers do you have to sell to hit that number?
These numbers are going to be very important as you move forward. It will give you context when you begin to think and put together your sales team and how many sales you have to have when you start doing your marketing, how many people are we marketing to, because if you’re not careful, you will simply fall into the trap of, “We just need more.” You’ll spend more money on sales. You will spend more money on marketing, but there’s no real target for it. We need to know where and when America’s Leadership Expert.
This is Podcast Number 58 with Clay Staires Tulsa Business Leadership, the Staires Steps to Freedom, Step Number Two, Where and When.